Offsetting the initial capital cost of Rental Properties against Realised Gains

QUESTION

To ask the Minister for Finance the estimated first and full year cost of a tax deduction against rental income for an element of the capital cost of a property in the initial years of ownership of a residential rental unit with a corresponding reduction in the base cost of the property on a future disposal for capital gains tax purposes based on 4% of the capital cost per annum for the first five years.

REPLY

The Report of the Working Group on the Tax and Fiscal Treatment of Rental Accommodation Providers (2017) identified the measure suggested by the deputy as a possible medium-term option. The report does not cost the measure but notes that three factors relevant for the costing would be:

the reduction in current income tax revenues;
in the longer term, the claw-back of the deduction as CGT rather than income tax, USC and PRSI; and
the potential for loss to the Exchequer if the property is not subject to CGT in future.

I am advised by Revenue that to cost the measure, certain further information would need to be available, including the number of eligible landlords and estimates for the relevant element of the capital costs. In the absence of this information it is not possible for Revenue to identify a cost.